Boeing could be on the cusp of securing a huge order from China, as they are reportedly in talks regarding a $30bn purchase of around 100 twin aisle jets. However, the escalating tensions between the US and China could put the whole deal in jeopardy.
Boeing are in the midst of a huge negotiation with Chinese airlines. According to Bloomberg, they are discussing as many as 100 twin aisle, wide-body jets that could be worth as much as $30bn to the US manufacturer. However, things aren’t going to be easy for Boeing, as tensions between Washington and Beijing continue to escalate.
The negotiations
According to the Bloomberg report, negotiations focus on around 100 widebody aircraft. Under consideration are both the popular 787 Dreamliners as well as the forthcoming 777X. it is suggested that the 777-9 variant is of particular interest to China, which is not surprising given its high capacity and competent range.
The airlines involved are neither named nor really matter, as the Civil Aviation Administrator of China (CAAC) has a controlling interest in all Chinese airlines. While they are run independently, the CAAC has a say over any purchases made, and is undoubtedly negotiating with Boeing for orders that will end up with all six domestic airlines.
It’s been cautioned that no deal is imminent, and that the trade war is a major concern for all involved.
Trade war problems
The world’s two biggest economies have been at loggerheads for some months now. Just when it seemed an agreement was on the horizon, the US has alleged that China has backtracked on agreements made during the most recent round of negotiations. As such, another wave of tariffs was launched.
Trumps knee jerk reaction to the Chinese allegedly reneging on their deal was to slap harsh tariffs on a staggering $200bn worth of Chinese exports. In response, China raised tariffs on around $60bn worth of US goods in mid-May. There was even talk of China reducing Boeing orders as a result.
For the two administrations involved, it’s a game of who blinks first. But, caught in the middle are numerous innocent businesses who are bound to the other through long standing trading partnerships.
In China, Huawei have been blocked from buying US tech, and a number of video surveillance firms have been banned from operating in the US. Beijing have hit Ford Motor Co’s main joint venture in China for antitrust violations, and are probing FedEx for ‘wrongful’ deliveries.
But, perhaps none have been so injured by this latest round of issues as Boeing. The plane maker is intrinsically linked with China, and China with it. So much so that Boeing are evaluated to enhance the economy of the Chinese nation by more than $1bn a year, according to CNBC.
Earlier this year, Boeing delivered their 2,000th plane to China; to Xiamen Airlines but essentially to CAAC. As such, CAAC is by far Boeing’s biggest customer. In comparison the biggest airline in the US, American, operates around 484 Boeing jets.
China and Boeing
The rising aviation power of China has seen them on track to become the world’s largest aviation market over the next decade. By 2035, they aim to have built an additional 200 airports nationwide, and it is estimated that they will be responsible for more than a quarter of all the world’s air travel.
To put this into context, Boeing delivered their first 1,000 planes to China over the course of 40 years. The next 1,000 took just five years to arrive. Chinese demand for air travel is so great that they’ve been blamed for an international shortage of pilots.
A large order from China could see Boeing making up some ground it’s lost due to the 737 MAX disaster. However, until tensions between Washington and Beijing start to subdue, the entire deal hangs in the balance.